How do I correctly compare offers from banks for home financing?

Strategies and criteria: How to thoroughly examine mortgages

If you want to compare financing offers , you need to proceed like a pro. Put emotions aside. It's about math and contract law. Here are the crucial steps and parameters to separate the wheat from the chaff.

The deadline: Time is money

The most common mistake laypeople make when comparing financing offers is overlooking the time factor. Interest rates on the capital market (swap rates) fluctuate daily, sometimes hourly.

• The rule: If you want to compare financing offers , the offers must be from the same day, ideally from the same morning.
• The problem: An offer from Bank A on Monday can no longer compete against Bank B on Friday because the market has turned around.

Therefore, demand binding offers by a specific date to be able to fairly compare financing options . Anything else is just guesswork.

The interest rate: Store image vs. reality

Interest rates are the biggest factor. But beware: the advertised guideline rate on the website is rarely the rate you'll actually receive.

• Credit rating discount: Banks use "risk- adjusted pricing." The better your credit rating and the more equity you contribute, the lower the interest rate. When comparing financing offers , always request a personalized offer tailored to your specific situation.
• Margin: With SARON mortgages, the interest rate consists of the base rate (SARON) plus the bank's margin. When comparing financing offers , focus on this margin. The SARON rate is the same for all lenders; the margin is negotiable.

The amortization model: Direct or indirect ?

A critical point when comparing financing offers is the repayment (amortization) of the second mortgage.

• Direct amortization: You pay the debt back to the bank. The mortgage decreases, the interest payments decrease, but the tax burden increases (less debt deduction).
• Indirect amortization: You pay into a Pillar 3a account at the bank, which is pledged as collateral. The mortgage remains high (good for tax deductions), and the pension capital grows tax-free.

When comparing financing offers , pay attention to whether the bank requires you to use direct amortization or allows the often more tax-efficient indirect option. Also, consider the fees or interest charged on the Pillar 3a account. A poor interest rate on the Pillar 3a account can negate the advantage of a favorable mortgage – a detail many overlook when comparing financing offers .

The small print: fees and terms and conditions

Those who only look at the interest rate often fall into the fee trap. To honestly compare financing offers , you need to check the one-time costs and exit fees.

• Appraisal costs: Some banks charge between 500 and 800 Swiss francs for the property valuation. Others cover this cost. This is a factor you need to consider when comparing financing offers .
• Suspension fees: What does it cost if you want to terminate the loan early (e.g., due to a sale)? The prepayment penalty can amount to thousands of Swiss francs. Some institutions are more lenient than others in this regard. This is essential if you want to compare long-term financing offers .

Cross-selling: The pressure to generate additional business

Banks often lure customers with low interest rates, but demand services in return.

• "We will give you a 0.1% discount if you transfer 50,000 Swiss francs of new money to us."
• "The interest rate only applies if you also have your salary account with us."

When comparing financing offers , factor in these "opportunity costs." Are the fees for the checking account higher than at your current bank? Then the interest rate discount might be misleading. Anyone who wants to compare financing offers properly should consider the total cost of ownership of the banking relationship .

The strategy: Mix or Mono?

Another aspect to consider when comparing financing offers is the flexibility in terms of loan denominations.

Does the bank allow the mortgage to be split into tranches (e.g., 50% fixed-rate mortgage, 50% SARON)? And if so, under what conditions?

Some banks offer good fixed-rate mortgages, but expensive SARON products. If you want to split your mortgage, you need to evaluate the entire package when comparing financing offers .

Conclusion

The answer to "How do I compare offers correctly?" is: comprehensively and simultaneously. Anyone who wants to seriously compare financing offers shouldn't be blinded by the first advertised interest rate they see. Always obtain 2-3 competing offers for the same date. Pay meticulous attention to the margin on the SARON (German standard interest rate), the flexibility in amortization, and hidden costs in the fine print.

Remember: The bank wants to sell you a product. Your job is to find the product that fits your life by objectively comparing financing offers – not just your budget today, but also in ten years. Take advantage of the competition. If you show the bank that you can actively compare financing offers and present competing offers, there's often still room for negotiation on the interest rate.

If you want to avoid the hassle of contacting dozens of banks, or are looking for a neutral tool to help you objectively and transparently compare financing offers , Loft offers independent comparison calculators and market data to help you make your decision.

Glossary

• Comparing financing offers: The systematic process of comparing mortgage offers from different providers in terms of interest rate , costs and conditions.
• Indirect amortization: Repaying the mortgage via Pillar 3a. An important criterion when comparing tax-optimized financing offers .
• SARON margin: The bank's markup on the base interest rate. Since the base rate is fixed, the margin is the decisive factor when comparing flexible financing offers .
• Prepayment penalty: The penalty fee for early termination of a fixed-rate mortgage. A risk factor to consider when comparing financing offers .
• Swap rate: The entry price for fixed-rate mortgages on the capital market. It fluctuates daily and makes a comparison on a specific date necessary when comparing financing offers .